This hasn’t been a good year so far for Nintendo. The Japanese video game company’s stock price took an unexpected tumble after it debuted its “eighth-generation” console at the Electronic Entertainment Expo last month, and now, Nintendo has announced that it will be slashing the price of its 3DS handheld gaming console from $249.99 to $169.99 on August 12 (with similar price cuts in Japan, Europe, and Australia), less than five months after it went on sale in North America.

The Nintendo 3DS: Virtual Boy Part II?

The much-heralded “glasses-free 3D” portable gaming device was outsold over 2:1 by Sony’s seven-year old PSP in the second quarter of 2011 (a three-month period that saw The House Mario Built post a $330 million loss), and its first-year retail struggles have drawn comparisons with that of the ill-fated Virtual Boy, which is commonly regarded as the lone black mark in Nintendo’s record of overwhelmingly successful gaming console releases since 1983’s Famicom.

The slow sales for the 3DS have led Nintendo to lower its profit forecast by a massive 82%. Portable video gaming used to be the one segment of the market where Nintendo had the clear and significant advantage over console rivals Sony and Microsoft. While the home “console wars” have seen Nintendo, Microsoft, and Sony occupy the top monthly and/or quarterly sales spots at various points across the lifespans of the sixth and seventh home video game console generations, until recently, Nintendo’s DS handhelds were the undisputed king of portable gaming.

The iPhone 4: can run Unreal Engine 3-based games

I can only speculate as to why Nintendo’s fortunes have taken this drastic turn for the worse. There was the poor software selection during the 3DS system launch (something company president Satoru Iwata admitted to shareholders was a major problem). But I think more than anything, the company might have overestimated the appeal of 3D gaming and underestimated the competition, not just from Sony’s PSP, but also (and even more so) from non-traditional portable gaming platforms such as smartphones, tablets, and netbooks.

The Xperia Play: Playstation Certified Android-based smartphone

Many browser-based games are free or rely on micro-transactions while the average price of the top 300 games sold on Apple’s App Store was $1.44 as of last month. Android-based smartphones have a large number of free and minimally-priced gaming options as well (a market Sony is entering with its hardware-agnostic Playstation Certified program). By contrast, the typical cost of a full 3DS game can be anywhere between $40 to $50 when purchased brand new. Of course, browser- and app-based games lack the depth of content, polish, and development budgets of their dedicated portable gaming console counterparts and the 3DS has more processing power than your average smartphone. Still, smartphone games are improving in quality all the time and the processors used in smartphones and tablets are predicted by Moore’s Law to continue increasing in transistor count at an exponential rate until at least 2015. Nintendo’s handhelds are obviously also subject to Moore’s Law but since, on average, it takes Nintendo four-and-a-half years to release a gaming handheld with a significantly upgraded processor over the previous model (going back to the days of the original Nintendo Game Boy), devices that have shorter development cycles and more frequent (even annual) product updates—such as smartphones and tablets—will likely surpass the Nintendo 3DS in processing and rendering power within its retail lifespan.

Virtual Boy: Actual Failure

Where does Nintendo go from here? I doubt it can afford to abandon the 3DS the way it did the doomed Virtual Boy, and even if it could, the company seems so outwardly committed to the glasses-free 3D gaming concept that I think it will stick with the device for at least three years before we even see a hint at a change in strategy. Nintendo may have a well-deserved reputation as a design innovator (the Wii was an especially ballsy move that paid off), but it has always been pretty conservative within the parameters it chooses to operate in: Think back to the company’s foolhardy insistence on using cartridges as the game storage medium for its Nintendo 64 console, a decision that many viewed as contributing significantly to Sony displacing Nintendo at the top of the home gaming console heap with its best-selling Playstation.

Nintendo's hopes hinge on the success of the upcoming Super Mario 3D Land

I think most of us commenters and observers want to see Nintendo succeed, if only for sentimental reasons (the Nintendo Entertainment System was my first ever video game console, as I imagine it was for many people who grew up during the 1980s). But there’s no sugarcoating the fact that Nintendo recorded a second quarter loss of a third of a billion dollars during a recession year. The company has always found success by sticking to its strongest, console-exclusive intellectual properties, but I’m not sure that putting out a new, 3D Mario game will be enough to generate the needed hardware sales this time around.

Next week: We go back to talking comics with the next installment in my “Filipino Art in American comics” series of articles, featuring a certain Image Comics founder. Don’t miss it.

[…] year that The Good Ship Iwata was in for some rough sailing ahead, as I’d already discussed in an earlier column. But while the amounts involved are staggering, history suggests that this is something that […]